Mercury

I think we can all relate to that @dmedin. You raise an interesting point from an investment and trading perspective as well as a couple of issues prevalent in the wider economy. Quite a lot for one thought... It is firstly noteworthy that the price of coffee in an average coffee shop has increases steadily over the past 10 or so years. I don't know the exact stats but in London you could get a coffee for less than £2.00 10 years ago and now it is closer to £3.00. In the same time period the commodity price of coffee went up X2 and dropped X2 but retail coffee prices just kept on rising steadily. If you then look at the economics of a cup of coffee (see link to an FT article below) you will see that the price of coffee itself is only 10% and only a fraction of that is coffee itself. The 4 big cost drivers are: Company profit requirements Taxes (which I assume includes rates) Staff costs Shop & Rental https://www.ft.com/content/44bd6a8e-83a5-11e9-9935-ad75bb96c849 So if coffee does shoot back up to the 30,000 (I think that is $3/lb) from the current 11,000 the impact on the retail price, and perhaps even on the corporate profits, will be minimal but the growers will benefit so that's cool. This illustrates a number of economic issues for me, which may play out in the near future as follows: Actual producers of valuable stuff are getting screwed and this is exacerbated in poorer countries that do not benefit from price protection of organisations like the EU or the United States federal government. If anything illustrates the negative issues in the current capitalist and political system this is it. Not to make a political statement but surely the answer to issues like migration pressures is to support people producing stuff in these countries such that they can make a decent buck and improve their local economies accordingly. This leads me to the next major issue, which is the incessant focus on growth. This is truly the most decisive and short sighted part of modern economics as pertains to capitalism for me. Everyone involved should be mandated to read a book called limits to growth (an ecological work not economic but there are interrelationships). The capitalist system we have is predicated on the value of the company going up only if you get growth, as opposed to just being profitable and producing free cashflow. This is changing a bit but only because of financial engineering rather than as a philosophical and fundamental change in the model. As we hit the top of population curves (hopefully cos if we don't we are all screwed, and I don't mean economically) growth will go into permanent decline. In short we need a new model, fast! I suspect we will have to wait for an almighty collapse before the powers that be get this or indeed until we get new powers than be... Governments are struggling to raise revenue and the need for politicos to promise the earth (literally in recent times!) puts even more pressure on funding. Debt raising is all but tapped out (one reason the Corbyn/McDonnell Marxist policies would be a catastrophe for the UK as any attempt to raise the kind of debt they are talking about would push the UK over the edge of credit rating and crash the GBP, thus making their low interest argument redundant as the rates the UK would have to offer on Gilts would be astronomical and then bang goes the housing market and then follows rampant interest rate rises, inflation and collapse but that's ok cos it will be fairer... Basically Venezuela!). But bring it back to coffee, local government have been screwing their retailers with rates, which is making owing a local shop unviable. They are killing he goose... In addition central governments can't get tax revenue from international internet based companies, mostly US based. The EU seems incapable of dealing with this issue and globally there is no consensus for the kind of new tax regime needed to address the issue. Thus the rich (Bezos etc) get richer. The property bubble and the related systemic "need" for property trusts to generate yield, which is their version of growth, leads to rent inflation that is disconnected to the underlying economics (i.e. retailers cannot make a profit). Again the property trusts are killing the goose and in most cases the actual investment cost is far far lower than the revaluations they use to calculate current yield requirements. Interestingly enough if and when we get a property crash their yield will automatically improve because the valuations will plummet. Funny ol world... Of course all their customers will be out of business so no free cash flow. Oh well you can't have everything I guess... Lastly, with the above economic model squeezing growth, companies look to control their costs, the biggest one typically being staff costs, which is why we haven't seen the kind of wage inflation we might have expected from a recovery (which it isn't really). When all the above chickens come how to roost we will get massive job losses, the last shoe to drop in the economic cycle leading into a recession. The look out below! And all that from a cup of coffee, who knew...

Technicals are a reflection of the market dynamics and as such do not drive the market. No technical analyst worth their salt would suggest they do, although I have heard people talk about self fulfilling prophesy effects, which I discount as only short term at most and therefore not relevant to me. Some techniques also focus on mapping sentiment (principally denoted as Fear and Greed) over time and as human nature and sentiment related to human nature are consistent a technical analyst can indeed use a purely technical approach to both time the market and forecast likely scenarios and probability weight these. However I have always preferred to set my technical analysis within a fundamentals (or rather macro) context. This doesn't have to be complex. In the case of stock indices it happens to be very complex but in the case of soft commodities like coffee it is rather simplistic. As I mentioned at the start of this thread, at current prices coffee plantation owners cannot make sufficient money to make ends meet so price has to go up. Add to that a general level of depressed soft commodities prices across the board and you get what the pros are calling the "reflation trade" (don't know why they always have to give thing a name... Marketing I guess...). When this occurred to me I checked the price charts. Fortunately IG have a lot of history on this market, alas not on some of the other softs, which rule them out for me. Even a cursory look at the charts tells you price is going to go up at some point, probably soon. Given the fundamentals backdrop I then used purely technical analysis to do the rest and have caught a few good swings before catching the upswing we are now in. Once stop protected at BE I do not need to watch fundamentals any further, just manage via price action towards my targets (i.e. trend following!). This is my method and it has proved successful over the years so I see no reason to change it. Obviously there are many approaches, I do not suggest any of these are better or worse, just not for me. In fact I like to see people with different methods either agree or disagree as this makes me think about things from a different perspective. So there it is, perhaps we can agree to disagree and see where coffee takes up. Happen we cold both wind up right through different means but in the end it is all about making profits.

Unlike other major USD pairs GBPUSD has already broken out but is now either in a Flag consolidation or a deeper retrace to retest the breakout levels. Perhaps election uncertainty is in play and we will get a resolution (to many things I hope) on Dec 12.

Looks like the rally has broken down and while a turn above the wave 2 (brown) low is still possible the nature of the price action and the DX charts are indicative of a lower low at present.

USD Dx looks to be on the way up again. Surely another higher high will not happen..? I am targeting the Fib 62% for a turn at present an currently see similar moves on all major USD FX pairs.

PS: any reason you put this post in FX and not commodities? Do you view Gold as more of a currency than a commodity?

Thanks for the post @love4ever4nature, just to clarify, are you saying Gold will turn back bearish when you say bounce back? If so can you elaborate on your reasoning and have you any view what happens after that?

Copper may have completed a wave B relief rally, with a hit on the Fib 50% and a clear A-B-C pattern. A drop from here continues the deflationary trajectory, would weigh on economic indicators and bring up the crucial test of whether the market situation will resolve with a deflationary recession or an inflationary one. Falling copper prices will nix any emerging markets stocks rally and likely put a dent in the majors as well.

Gold and Silver have been in a bit of a really of late, which now looks like it may play out as a small consolidation. With a couple of bearish candles to end the week, after a Fib 38% turn, we could very well see these markets drop back through near term support, which would drive a much stronger bearish phase in my view. Some decent risk reward presents itself right now if we see a continuation of the bearish price action, or better still a small scale rally and turn (sell the rallies) but a break below the recent lows will be the key.

No breakout this week obviously but yesterdays candle was a spinning top, which either means a tend change of a breakout is on the way (yes up or down...). Still if we do see a positive candle on Monday that breaks higher that will most likely be a breakout confirmation. As such the upside potential is fairly significant and the move could be fast and furious. On the negative side, with the USD is rallying just now, and likely to continue for a bit, which could give some impetus to a breakout, the longer term set up for USD is bearish.

Wow indeed @dmedin, this is what I have been getting at since I started this thread. Initially I thought the market would drop into the historic bottom zone before breaking out but after the wave 2 (blue) bottom and rally I began to think it might test the weekly channel, which it did. Previously I posted that I expected an EWT retrace down, which we got and I label this 1-2 (green). This topped and turned back down right at the weekly trend line (actually a confluence of 2 lines on my weekly chart). The retrace made only the Fib 38% before rallying hard with a breakout of the weekly trend line and key horizontal resistance. The market is currently pausing at this point and on my 1H chart it looks to be consolidating in a short term Flag formation. If this breaks out hard to the upside I doubt we will see it at these levels again fora long time. This is assuming this breakout will be more like the 1975 or 1994 rally and not the 2004 one, which is likely to be the case in my view because the bearish phase was in an A-B-C, after which we get a strong motive 1-5). Note also several price gaps, not uncommon it seems in this market but still these are a series of breakaway gaps, which are very bullish. Given the potential to hit the market maximum zone (30000+) there isn't much out there that compares to the potential on this market. To @TrendFollower point on this similar thread a wide stop would be indicated at this time, circa 10.500 below the wave 2 (green). Having said that, other than a small stop hunting spike back retest through the key resistance/support levels we are at, I would not expect the market to penetrate this 11,500 level once it rallies away so once we see price rally hard stops at break even on a breakout would be appropriate for me (i.e. stops below 10500 until you see a strong rally away over a few days/weeks then move to BE). For the record I am Long Coffee for a long term trade (futures route) and seeking to add on any breakout.

Depends, as ever, on how, when and for what purpose you use it. I got long Gold back in Oct 2018, what would trend analysis be telling you at that point? There were plenty of trend followers telling me the trend was still down at the time... I got Long Coffee in Oct this year, again the trend analysis was suggesting down. EWT, among other things, helps me prepare for and be mindful of potential major turning points. Once a trend change is confirmed and a major move under way then I tend to revert to trend following techniques as primary tools. However EWT also helped me spot the Gold and Silver top recently and swing trade it so it is still useful within a trend, especially in the early period when large retraces are to be expected. Any individual technique will be worst than useless if you follow it out the window to the exclusion of other things, especially where different techniques might be showing conflicting signals.

Coming up on the weekly chart triangle line very fast. Key break or hold point for me.

Since my last post Coffee reversed on the Fib 38% and that was all the retrace we got. After a break of the weekly chart resistance trend line I went Long again and then we got a fast push up through the gap to the next resistance level. A break and retest of this is taking the form of a consolidation on the 1H chart at present. A break through this to the upside is what I am looking for to confirm a long term bullish trend change.

Might be a breakout with more conviction this time after the 1-2 retrace.

I will ignore the fact that you asked and answered your question on my behalf and assume you actually want an answer. It is hard to divine intonation sometimes, which is why email is so divisive but I'm assuming you were not intending to be sarcastic? I am not aware of the context of Murphy's statement, perhaps you could attach the full text or video clip if it was an interview. I am somewhat aware of Murphy's work. In fact I agree, and indeed I believe I have commented as such in various threads, that one single form of technical analysis, or any kind of analysis for that matter, is insufficient to base a trading strategy. Even a cursory glance at my analysis as posted on the forum should tell you this. I have also previously posted on the range of techniques I use and the fact that I blend them. Again that is evident also from my posts. Not only do I use multiple techniques across multiple time frames and use this to inform my trading trigger rules but I also practice what Murphy is famous for, which is correlation analysis across multiple markets. That is the main reason I analysis so many markets, thought I only trade a few. Specifically on EWT, as you mentions correctly, I do use it as part of my big picture assessment of where a particular market is in a cycle. I also use all my other techniques in concert and add fundamentals assessments, some of which I get from professionals that are deeper into the markets than I can ever be. I do not use EWT as a trading trigger but merely as a correlating rule that must be in place to support a trade entry or exit.

Never does! Classic EWT looks for a strong retrace after a top out. You don't need to hit the Top, such a trade is what I term a preemptive and it is ok if you don't overdo it and keep stops close. I have a few such positions on at present and at BE stops now. However the thing that really gets me interested is a retrace after a credible top out and turn that turns with a lower high at key resistance. This is even stronger/more interesting if this retrace occurs after a channel breakout and that is where we appear to be at present. I now want to see breaks to lower low across all indices, especially on the Russell 2000. Meanwhile Gold/Silver remain buoyant and USD appears to be keeling over (not quite there yet but should resolve soon). On the Dax I have that 1-2 retrace I was signalling yesterday, went higher than I at first thought but not to levels that might be doubt my lead scenario, yet. I have a credible top and turn. I have NMD at the lower high turn, which turned at the Fib 62%. The EWT labeling is good with a 1-5 down off the top and an A-B-C to the retrace turn. As I said we now need to see a break below 13040. You will see similar set ups on most major indices, which is also important. My smaller 1-2 (grey) is highly speculative and we might, probably will, see a more definitive retrace before things really get going and this may occur on higher highs for the retrace on US large caps. That said, any further drops prior to US open could send the whole mess down fast, as we have seen before when US large caps top out on new ATHs.

So further to the recent unpleasantness, in addition to an ability to block threads users are not interested to see (although personally this one I care less about), can we seriously look into an ability to block comments and content from users we do not wish to engage with? This is about addressing the negative effects of social media, which are becoming more of a social issue elsewhere. I imagine is people could do so they might be more inclined to get more involved in discussions. It is is not possible then ok, people can always chose to leave the forum I guess...

They say a day is a short time in politics, although 10 minutes of the UK election, US Presidential game show or EU un-elected bureaucratic claptrap is not short enough for me at present, but it seems a few hours is a short time in the capital markets. Price action recently leads me to suspect we are in the throws of another retrace rally that may play out in an A-B-C retest of key resistance areas. At this stage I imagine that we must wait for the US open to resolve the matter. Sell the rallies is my motivation at present to add to my higher up Shorts but targeting key turns and breakouts is the key to this for me as until the move really gets going the indices are prone to whipsaw price action and even potential reversal, as we are all too used to seeing.

LoL! Yes but also Kindles, Smart phones, Social Media and, oh yes, retail trading... Let's hope for better things.

Bitcoin has arrived a a crucial juncture from a purely technical point of view. The breakout of the daily chart Pennant (if confirmed) is now being retested at the Fib 76/78% support zone. A hold and fast rally away from this zone would get me interested in the bullish scenario but a confirmed break through support brings up a couple of alternatives being: a retest and rally away from the lower consolidation channel line (weekly chart) the end is nigh! Let's see...

USDJPY looks remarkably similar to the DX basket in recent times with a top out and 1-2 retrace to the Fib 62% this time. Now a break of a lower channel line and failed retest is setting up a bearish phase. Falling USD more broadly will help the case but we probably need to see falling Nikkei as well to drive this pair lower. If we do get both then this pair could outperform all other main USD pairings.

All the chatter is on stocks at present (will they wont they) but FX could be about to get interesting (i.e. volatile). Looks like EURUSD is setting up to break out of the current short term retrace/consolidation to the upside to set up a test on the weekly resistance trend line. A break here and of the associated horizontal resistance above will be a crucial test of whether or not this time the rally has legs.

USD DX top and turn at the top of the weekly chart channel/Triangle looks set to be confirmed. We have seen price make a Fib 50% retrace and turn back down and then put in a smaller retrace, again to the Fib 50%. The markets are now making an approach on the lower channel line and horizontal support levels. Breaks of these will see the likes of EURUSD and, together with stock declines, USDJPY make breakouts of their own. After all the USD strength over the past years this will surely be pivotal for many markets...

Agree @elle, I see breakouts of important channels across the board and importantly this has happened fairly fast after failure of key resistance points. In some cases this has taken the shape of an exhaustion spike, which is a signal of a trend change (if proven!). There have been some failed breakout zone retests, which is encouraging for the bearish outlook, but there is still a lot of support to get through, especially on the US large caps. USDJPY has also broken its channel and put in a failed retest but after the Nikkei fast drop and recovery last night the Yen direction is not yet resolved. Gold/Silver turned and rallied (or at least moved into consolidation) prior to the stocks top and drop and remain there for now. I would want to see Gold/Silver rally some more, the Yen break decisively and the Russell 2000 break down through its current consolidation. Main thing to look for is breaks of next level support to cement the bearish trend across multiple stock indices. FTSE is breaking lower this morning and Dax is setting up to follow it seems. At present my sense of the longer term is that on US large caps this is a retrace before another push but the nature and extent of the forthcoming bearish move (if we get it) will shed more light and my focus now is to manage the Shorts I have on and add if there are further break points. On the Dax and the Nikkei the turns, at present, seem to be wave 2s so here I might expect a fairly significant drop, let's see...